Dollar General Corp. (NYSE:DG)

Over the observed period, net operating profit after taxes (NOPAT) generally increased, peaking in fiscal year 2023 before experiencing a decline. Invested capital consistently rose throughout the period, while the cost of capital fluctuated modestly. Consequently, economic profit demonstrated a positive trend overall, though with recent deceleration.

NOPAT Trend

NOPAT increased from US$1,981,150 thousand in 2019 to US$2,145,885 thousand in 2020, representing a growth of approximately 8.3%. A significant increase was then observed, with NOPAT reaching US$3,105,494 thousand in 2021 and further increasing to US$3,112,907 thousand in 2022. However, in 2023, NOPAT rose to US$3,664,406 thousand, marking the highest value in the period, before decreasing substantially to US$2,431,523 thousand in 2024.

Cost of Capital

The cost of capital experienced minor fluctuations. It rose from 7.26% in 2019 to 7.44% in 2020 and 7.46% in 2021. A slight increase to 7.57% was noted in 2022, followed by a decrease to 7.27% in 2023, and a further decrease to 6.96% in 2024. These changes were relatively small compared to the changes observed in NOPAT and invested capital.

Invested Capital

Invested capital demonstrated a consistent upward trend throughout the period. It increased from US$18,107,408 thousand in 2019 to US$19,125,860 thousand in 2020, US$20,896,699 thousand in 2021, US$21,499,995 thousand in 2022, US$24,763,719 thousand in 2023, and finally to US$26,309,034 thousand in 2024. This represents a cumulative increase of approximately 45.2% over the entire period.

Economic Profit

Economic profit generally followed an increasing trend, mirroring the NOPAT growth. It rose from US$667,305 thousand in 2019 to US$722,987 thousand in 2020. A substantial increase was observed in 2021, reaching US$1,546,416 thousand, and continued to US$1,484,668 thousand in 2022. The highest economic profit was recorded in 2023 at US$1,865,039 thousand. However, in 2024, economic profit decreased significantly to US$601,170 thousand, coinciding with the decline in NOPAT.

The observed decrease in both NOPAT and economic profit in the most recent period warrants further investigation to determine the underlying causes and potential implications for future performance. While invested capital continues to grow, the reduced profitability suggests a potential need to evaluate capital allocation efficiency.

The annual financial data indicates notable fluctuations in the profitability metrics over the presented periods.

Net Income

Net income showed a consistent increase from February 1, 2019, through January 29, 2021, rising from approximately 1.59 billion US dollars to 2.65 billion US dollars. This upward trend indicates improved profitability during these years. However, in the subsequent years, net income declined, falling to about 2.40 billion US dollars by February 3, 2023, and further decreasing to approximately 1.66 billion US dollars by February 2, 2024. This decline in net income suggests challenges impacting profitability in the most recent years analyzed.

Net Operating Profit After Taxes (NOPAT)

NOPAT similarly displayed an upward trajectory from February 1, 2019, through February 3, 2023. It grew from approximately 1.98 billion US dollars in 2019 to a peak of about 3.66 billion US dollars in 2023. This represents significant improvement in operating efficiency and profitability over this time frame. However, in the latest period ending February 2, 2024, NOPAT declined notably to around 2.43 billion US dollars, indicating a reduction in operating profitability despite the previous gains.

Overall, both net income and NOPAT exhibited substantial growth from 2019 through early 2023, reflecting enhanced financial performance and operational effectiveness. Nevertheless, the data for the most recent year reveals a marked decrease in these key profitability indicators, implying emerging issues or external factors affecting the company’s financial returns. Close monitoring and further analysis may be required to understand the drivers behind this downturn and to assess the company's future profitability prospects.

The data reflects trends in the provision for income taxes and cash operating taxes over a six-year period, from February 2019 to February 2024. Both financial items are presented in thousands of US dollars.

Provision for Income Taxes

The provision for income taxes displayed an overall upward trend between 2019 and 2023, beginning at 425,944 thousand US dollars in 2019 and peaking at 700,625 thousand US dollars in 2023. Specifically, the amount increased steadily from 2019 through 2021, reaching a high of 749,330 thousand US dollars in 2021. After this peak, the provision declined to 663,917 thousand US dollars in 2022, then rose slightly in 2023 before substantially decreasing to 458,245 thousand US dollars in 2024. This pattern suggests variability in tax expense recognition possibly influenced by changes in taxable income or tax planning strategies.

Cash Operating Taxes

Cash operating taxes also followed an increasing trend in the initial years, starting at 457,118 thousand US dollars in 2019 and reaching 823,390 thousand US dollars in 2021. This was followed by a decline in 2022 to 660,916 thousand US dollars and continued decreases through 2023 and 2024, reaching 596,198 thousand and 553,172 thousand US dollars respectively. The decline after 2021 indicates a reduction in actual cash outflows related to income taxes, which may correspond to changes in timing differences or tax provisions to cash payments.

Comparative Insights

Notably, cash operating taxes consistently exceed the provision for income taxes through 2021 but then fall below the provision in 2023 and 2024. This shift indicates a divergence between the tax expense recorded under accrual accounting (provision) and the cash paid for taxes, potentially due to deferred tax assets/liabilities or timing differences in tax payments. The peak of cash operating taxes in 2021, which is significantly higher than both preceding and subsequent years, may reflect a one-time tax payment or adjustment.

Overall, both the provision for income taxes and cash operating taxes exhibit peaks around 2021, followed by notable declines, with cash operating taxes showing a sharper descent. The divergence observed in recent years suggests evolving tax payment patterns and provision estimates that warrant closer examination for their implications on the company's tax strategy and cash flow management.

Total Reported Debt & Leases

The total reported debt and leases exhibit a consistent upward trend over the six-year period. Beginning at approximately $11.1 billion in early 2019, the figure increased steadily each year, reaching around $18.1 billion by early 2024. This represents an overall increase of roughly 63% from 2019 to 2024, with notable acceleration in growth between 2021 and 2023.

Shareholders’ Equity

Shareholders’ equity demonstrated moderate fluctuations with a slight downward trend until 2023, followed by a recovery in 2024. Initially valued at about $6.4 billion in 2019, it increased marginally in 2020 before decreasing progressively to a low of approximately $5.5 billion in early 2023. A rebound occurred in the final year to nearly $6.7 billion, almost recovering the equity levels observed at the beginning of the period.

Invested Capital

Invested capital showed a steady increase throughout the entire period. Starting at approximately $18.1 billion in 2019, it rose gradually each year, reaching about $26.3 billion by early 2024. This constitutes an increase of approximately 45% over six years, indicating continued investment and growth in capital base. The increases are consistent and without significant volatility.

Overall Analysis

The company appears to have increased its leverage significantly, as evidenced by the growing total reported debt and leases, which outpaced the growth in shareholders’ equity. Despite a temporary decline in equity through 2023, the final year saw a recovery to prior levels. The consistent rise in invested capital alongside increasing debt suggests an expansion strategy possibly funded by borrowing. The leverage position warrants monitoring due to the growing debt level relative to equity.

The period between February 1, 2019, and February 2, 2024, demonstrates a fluctuating pattern in economic performance. Economic profit generally increased from 2019 to 2023, but experienced a substantial decrease in the most recent period. Invested capital consistently rose throughout the observed timeframe. The economic spread ratio, a measure of profitability relative to invested capital, reflects these trends with notable variations.

Economic Profit

Economic profit exhibited an upward trajectory from US$667.305 million in 2019 to US$1.865 billion in 2023. However, a significant decline to US$601.170 million was recorded in 2024. This suggests a weakening in the generation of value exceeding the cost of capital in the latest year.

Invested Capital

Invested capital increased steadily over the period, moving from US$18.107 billion in 2019 to US$26.309 billion in 2024. This indicates a continuous reinvestment of resources into the business, or potentially acquisitions and expansion, throughout the observed years.

Economic Spread Ratio

The economic spread ratio initially showed modest growth, increasing from 3.69% in 2019 to 3.78% in 2020. A substantial increase was then observed, reaching 7.40% in 2021, followed by a slight decrease to 6.91% in 2022, and a peak of 7.53% in 2023. The ratio experienced a marked decrease in 2024, falling to 2.29%. This decline aligns with the reduction in economic profit and suggests a diminished return on invested capital in the most recent period.

The divergence between the increasing invested capital and the declining economic spread ratio in 2024 warrants further investigation. While the company continues to deploy capital, its efficiency in generating economic profit from that capital has decreased substantially. The substantial drop in economic profit in 2024 is the primary driver of this change.

The economic profit and net sales figures demonstrate a generally positive trajectory over the observed period, though recent performance indicates a shift in this trend. Economic profit increased substantially between 2019 and 2021, followed by a period of fluctuation and a notable decrease in the most recent year. Net sales consistently increased year-over-year until 2024, showing a more stable growth pattern than economic profit.

Economic Profit

Economic profit exhibited growth from US$667.305 million in 2019 to US$722.987 million in 2020, representing a modest increase. A significant surge occurred between 2020 and 2021, reaching US$1,546.416 million. While remaining high in 2022 at US$1,484.668 million, economic profit further increased to US$1,865.039 million in 2023 before experiencing a substantial decline to US$601.170 million in 2024.

Net Sales

Net sales increased steadily from US$25,625.043 million in 2019 to US$27,753.973 million in 2020. This growth continued with a more substantial increase to US$33,746.839 million in 2021, followed by US$34,220.449 million in 2022, and US$37,844.863 million in 2023. The rate of increase slowed in 2024, with net sales reaching US$38,691.609 million.

Economic Profit Margin

The economic profit margin remained constant at 2.60% in both 2019 and 2020. A significant increase was observed in 2021, reaching 4.58%, and remained relatively high at 4.34% in 2022. The margin peaked at 4.93% in 2023, before declining sharply to 1.55% in 2024. This decrease in the economic profit margin in 2024 aligns with the substantial reduction in economic profit, despite continued growth in net sales, suggesting a potential decrease in operational efficiency or increased costs relative to revenue.

The divergence between net sales growth and economic profit margin in the latest period warrants further investigation. While revenue continues to rise, the diminished economic profit margin indicates that the company is generating less profit for each dollar of sales compared to prior years.